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tv   Bloomberg West  Bloomberg  January 8, 2015 1:00pm-2:01pm EST

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>> live from pier three in san francisco, welcome to "bloomberg west" where we focus on innovation, technology, and the future of business. the massive manhunt for the suspect to heinz the charlie hebdo magazine focuses on the northeastern part of the country. nine people have been taken into custody as well for their possible involvement. the rest of france remains under alert for further attacks. here is the former french prime minister. >> the priority is to track down and apprehend the terrorists who
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committed this abominable attack yesterday. >> meanwhile, france had a nationwide moment of silence today. one million copies of its recent addition in defiance of the attack. job cuts are coming at two major international companies. coca-cola will be cutting 1800 jobs of its workforce as it tries to reduce cost. they are trying to cut $3 billion in annual costs. meanwhile, standard chartered is throwing in the towel on its equities business cutting up to 4000 jobs in the consumer banking unit. they are under pressure to slash costs and return to profitability. california senator barbara boxer says she will not seek reelection in 2016. she is leaving after four terms in the senate. her retirement will create the first open seat in california since 1992. that is sure to be a hotly
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contested and perhaps the most expensive senate race ever. apple says it is one of the major job creators in the u.s. creating or supporting one million jobs since the birth of the app store. they say it's apps have created 620,000 -- 627,000 jobs directly from the apps and thousands more from support. now to lead. samsung electronics is forecasting a 37% drop in fourth-quarter profit. and it all percent drop in revenues. smartphone sales continue to stall, but dig a little deeper. maybe there is a still relying for the korean electronics giant. samsung is still the world's largest smartphone maker by market share, and the semiconductor business is booming with companies investing
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$15 million in a new fabrication plant. samsung has also made a huge push into the internet of things. the co-ceo spoke earlier this week at ces. >> by 2017 90% of all samsung products will be -- devices. that includes televisions and mobile devices. >> that is the question. has samsung found new revenue streams? joining us from ces is brian blair of rosenblatt securities. let to see you are surviving ces. apparently your razor is not the first casualty. you look great. i think it's really interesting that samsung is reducing the number of phones they sell as
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they tried to remain the most important company in cellphones. >> i think you should look at the apple model. they just have one phone. really right now they have three, with the different sizes, but there is something to be said about simplicity and error down the number of skus you have. at one point, nokia had 50 skus as well. it is hard to manage that. it is smart to bring it down to fewer skus overtime if they want to be competitive with apple and these chinese players who have been eating their lunch for the past nine months. >> you can see the market share coming down quarter by quarter gradually. still impressive and every other cell phone maker would love to have that market share. i was doing some calculations this morning on the numbers they put out last night and their
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operating profits are tiny compared to apple. they may sell the most phones but they don't make the missed money -- make the most money. >> they don't. a lot of the reasons is the asp. a lot of the phones are in the mid tier, they have some high-end business, but as you see more competition from these chinese players, samsung has had to come down in price quite a bit. a lot of their phones are still expensive to make so they are not getting the same profit margins that apple is who are selling 600 dollars seven hundred dollars, 900 dollars-plus phones. the high-end 6 plus is almost $1000. obviously you get a higher selling price from those. >> you look at the way they look at their semiconductor business. they have announced a huge project to build more mobile phone semiconductors. i have always thought of that as the canary in the coal mine for them. going -- they are letting the
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other cell phone makers tell them what they want in the chip so then samsung can design their phones around that. did we see a change in focus where the chip business will be the main thing, not the devices themselves? >> i think they need that ship business to be strong -- chip business in the years ahead to be strong because of what we see in the smartphone business. they were the exclusive manufacturer of the apple a series chips, which was in all of the ipads and iphones. it was only until 2013 that apple negotiated an agreement with tsm and took some of the business away. now we understand samsung is trying to get that back. the volumes are substantial from apple alone, who was maybe 70% of their business years ago. what they have to do is find some new areas of growth. you mentioned the internet of things. samsung's who is behind me and
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connected appliances a huge trend for them. they are also showing a competitor to the oculus rift. samsung is looking for new areas of growth and they think it is the internet of things, but it would be nice if the foundry business could be growing as well. >> what do you think a, what are the revenues for an iphone chip and what do they get for an internet of things chip? make a random guess. $85 for the iphone chip and a couple of dollars for the other? >> i would say maybe $30 for a base chip probably five dollars for an internet of things chip. big discrepancy in the selling price. if we see connected devices throughout homes over the next two years, the number will be bigger than even as 1.5 billion
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unit smartphone market. the asp's are small but the overall opportunity is substantially over the next level years. >> if it is that different, they would need to sell 600% more of those chips than the phone ships they are selling right now. i wonder if the center of samsung will be chips and not devices. >> it could shift to chips. they are hoping it is both. they are showing connected dishwashers over there, ought to connected appliances. inc. about it this way. you have one or two smartphones in your home, maybe more if you have kids. how many appliances do you have that could be connected, including light switches? it is probably around 50. if we all have connected devices throughout our homes over the next five years the internet of things will be bigger than smartphones and will be a
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substantial opportunity for samsung. >> i need someone to load my dishwasher, not run it with a chip for me. you mentioned the oculus rift. i saw it a few months ago from samsung. it was really just the same device that was made by samsung nothing really changed. have you seen anything ridiculous over at the samsung booth? >> the connected dishwasher is one thing i find interesting. i wonder about utility of connecting some of these devices. it make sense with lights. maybe my refrigerator could be good, but i do not see anything really ridiculous. everyone is doing curved screens. they are beautiful but i'm not sure it's ending -- an enhanced experience that will drive demand. a lot of these panel companies are betting that that is the next thing. nothing ridiculous. the oculus rift sounds
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ridiculous until you use it. it is really amazing how good it is. it is a truly immersive experience. i think that could end up to be huge. facebook feels the same way. >> i did try it in new york and it was pretty crazy. they had something that was meant to look like a mongolian yurt. i look at all the people sitting in front of me people were making food inside people playing music, and as i turned my head am a there was someone behind me and next to me. it was crazy. same demo they were doing? >> the one i saw had a game inside and you feel like you're inside again but the same thing. you look behind you and it feels very real. until you try it, it is hard to understand why this could be big or why facebook paid millions for it. you quickly become a believer. >> thank you very much.
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the date is set for one of the federal communications commission's toughest decisions. we will speak to one of the five commissioners who will determine how the u.s. will regulate the open internet. ♪
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>> on cory johnson and this is "bloomberg west." new tech toys were not the only things being announced at ces. it fcc chairman tom wheeler announced the date of the latest proposal for an open internet in an interview and said he may be in support for the strong internet rules that president obama suggested he wants including title ii regulation. listen to what he had to say. >> for the last 20 years, the wireless industry has been monumentally successful. hundreds of millions, billions
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of dollars of investment as a title ii regulated company. i'm saying to myself ok so there is a way to do title to write -- ii right. >> jessica is with us now. any clues of what that may look like in a proposal? >> it's a big issue in front of the agency right now and it's an important issue. the chairman has not shared his proposal, the specifics. >> the timing will be what? >> i expect to see it in february. by the 26th i in -- i expect the commission will vote. >> you can tell us right now if you want. >> i don't think i can. >> the reaction to this the reaction we have had when we
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cover it, that john oliver had shows how passionate people are about what they get on the internet. do the people understand the issues? >> i think so. internet is important to everyone in our civic and professional lives. the internet here is the envy of the world and we're getting a lot of attention right now, and that's a good thing. >> i want belabor the point, but you were at ces. you see where all of the stuff is going, resulting in all of the different products. i wonder what you saw when you saw that the consumer electronics show? >> first of all, it is a gadget geek heaven. we have football fields worth of new devices and technologies. all you hear over and over again is mobile, mobile, mobile. as somebody who thinks about the airwaves all the time, what i hear when i hear that is
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spectrum, spectrum, spectrum. >> there is an option going on right now that was expected to be good, but it has already raised $45 billion. in history of spectrum auctions only $50 billion has been raised. why this amazing success for what was not seen as the best possible spectrum which cannot go through buildings or is not the best in urban areas? >> and cannot your own lives. we have more mobile phones in this country than people. we like them more. more than half of adults have tablets or you readers. those devices use our airwaves like never before. some of the most important infrastructure we have in this country is now invisible. >> in particular with this option, i don't know how long this will go on for -- >> i think it will end in the next few weeks. >> the carriers -- buying
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spectrum is just the beginning of capital expenditure. what is the feedback that you get from carriers on what they are bidding on and want to see? >> right now the bidding is at $45 billion. it's become apparent that getting more spectrum in the market is important, to power all of those devices. carriers are willing to spend quite a bit of money to make sure they have the spectrum they need. >> it is interesting as they look at other things like content and mergers. when you see the spectrum offerings, you have another one coming up, which was out to be the big one, the repurpose thing some television spectrum. i always struggled to explain this to people. how do you do it? >> this is a traditional auction. we sell up licenses for the airwaves. in 2015 we are slated to hold an auction for the 600 hertz band. that is traditionally television spectrum. >> this is the beachfront
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property, the spectrum that can go through buildings, connect phones in the office. >> it goes really far, does not require the structure of many towers. that little band spectrum is super valuable. in the aftermath of this option which featured higher than spectrum, it has become apparent that the 600 megahertz spectrum will be really big. >> what are the obstacles to getting that spectrum of the tv owners of the current owners of the spectrum? >> we have an elegant solution that congress helped us, with, and that involves offering incentives to any broadcaster who chooses to no longer be in the business of broadcasting, to return their license to the sec. -- fcc. then we will take those licenses and repackage them and offer them up to the wireless carriers interested in purchasing them. as an incentive for the broadcasters, we will give them a cut of the proceeds. >> is that expected to be a
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competent process? how is that starting to look from the broadcasters? >> in the aftermath of this big auction for $45 billion, i think many broadcasters will take another look at the possibility for revenue in that 600 megahertz auction. >> as we say in the industry, $45 billion eight nothing. who are the beneficiaries of that? >> congress signed -- assign purposes for the money. there are two that are noteworthy. one come in a deficit reduction and two, it helps to construct something called the first responders network authority under which is designed to make sure police firefighters, and other first responders have access to high-quality spectrum in every community in the country so they can communicate when the unthinkable occurs. >> thank you for coming here. "bloomberg west" will be right
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back. ♪
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>> 3-d robotics ceo chris anderson says grown development at companies like amazon, google, and facebook are hoping to lead a revolution. emily chang started by asking about the timeline for amazon package deliveries and drones might be. >> how likely is it then drones will be delivering my amazon package? >> to your home, that is a ways off. >> how long? >> a decade? but delivering to a center where you can pick up a package --
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warehouse to warehouse, we can do that today. rural areas would be pretty easy as well. >> any reason this will not happen? >> regulation. in the u.s. it's not legal right now. >> i know the faa is considering changing the rules. how are those conversations going? >> they are going. the faa mandate is the safety of the national airspace. it was designed around manned aircraft, large aircraft, human pilots and passengers. what we have here is a completely different kind of problem. >> she also asked about buying parts from alibaba. >> i go to alibaba and this is where you buy wholesale parts. i need to buy some electric motors, so i picked from a menu and 10 days later this crate shows up at my doorstep and there are 5000 voters all made to my custom specs and i was stunned.
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basically i had robots in china work for me and they took paypal. >> don't miss the latest edition of "studio 1.0" tonight right here on bloomberg television. what a difference a few years makes kordell. now a private company and the product momentum on their side. they won 7 ces awards this week. we will show you why, next. ♪ >> it is 26 minutes past the hour and that means bloomberg television is on the markets. let's take a look at them or stocks are trading. we are seeing this rally continue. stocks are about at the highs of the session as there is a rebound from that fine-they decline. in terms of individual movers, apollo education group heading sharply in the opposite direction followed by the most in more than two years.
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the owner of the for-profit university of phoenix chain says that they are having trouble connecting with the classroom and are seeing people withdrawn from their classrooms. ♪
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police say nine people have been taken into custody for possible involvement. hans nichols is with us from paris with the latest. glad to have you on. we have seen rallies around the world. what is planned for tonight? >> the plans have already started to take place and that means candlelight vigils. this is a city lit by candlelight tonight. behind me outside of the
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opposite is of charlie hebdo we have one. there is another rally outside of a palace lots of people brandishing pencils, which has become somewhat of a symbol of fighting back. interestingly, a group of muslim leaders came out and pay their respects to the vigil and also condemned the violence. in addition to the man had, they are trying to find these two suspects at large. there will be a difficult political conversation in france. one woman recalled a referendum to bring back the death penalty. it's the beginning of a long and difficult conversation here in france, and frankly, elsewhere in europe. >> the news keeps on coming on this manhunt. when do we know right now, how do we know it?
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>> we know through a combination of local tv reports, local reporting, and the police tried to keep people informed. what we know is that these two brothers appeared to be in a town northeast of paris, about 50 miles away. earlier this morning there was quite a bit of chaos because in the south of the city a police officer was shot. she ultimately perished. police have not made a connection between this morning's shooting and what happened in the manhunt for the brothers. in addition, we have some reports of attacks on mosques throughout the country. that is the other element we are trying to tie together. we are hoping for more information in the coming hours. >> i have to tell you, you are over there and the american response has been interesting. some powerful stuff from john stewart, conan o'brien saying
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that telling a joke should not be like this. i will put it on twitter. thank you very much. switching gears, you could say dell is a whole lot different from a couple years ago. the company is now private and made some waves at the consumer electronics show in las vegas winning seven awards. we caught up with the vice chairman jeff clark and asked him about the latest and greatest from dell. >> it is our best ever consumer portfolio product. we won seven awards to date. we are pretty excited about that. one of them is the most tedious tasks -- prestigious in innovation. this is for the tablet and notebook. >> to the untrained eye, it looks like a usual notebook. why is this different? >> you might consider it a regular notebook, but what is unique is this is the world's
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smallest 13-inch notebook. we built around is borderless display. it is an infinity high-resolution screen. it has no borders. 13 inches and we took all the air out of the back so to speak and rebuild the world's smallest known work -- notebook without compromising performance and we increase the battery life to 15 hours in doing so. this has the distinction of being the smallest 13-inch notebook in 11-inch form factor with 15 hours of battery life. quite an innovative product. we also broke through in a new price point at $799. >> on the pc business, lots of talk about a resurgence in that business. how is the velocity of sales going on, how are overall pc sales going? >> for us, it has been quite a
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good run. seven consecutive quarters of year-over-year growth. q3 in the u.s. alone, our business grew 23%, which was bigger than the next two biggest competitors combined. you can see the momentum we have had for seven quarters. it is quite positive, we see stabilization in the pc business, and we see people going back to the pc, which is exciting for us. >> this is an android tablet, not necessarily known for its booming sales. why is this special? >> this product won the best of innovation at the ces show this week. it is hard to tell but it is the worlds thinnest tablet. also, it has the best display in the tablet industry. edge to edge qled screen.
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-- oled screen. it has 361 pixels per inch for an immersive experience. it will invite you to interact with the product. it also has the world's first 3-d sensing camera where you can focus and measure. if you look at this, we can refocus the picture from the individual to the bridge. >> how has going private allowed dell to innovate faster? >> we can make faster decisions. we make decisions that are in the best interest of our customers. we are able to execute faster without the overhead of managing the next 90-day period and looking at the best interest of our customers. you can see the products coming from that. a rich display, the world's
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smallest 13-inch notebook, the worlds thinnest tablet to date. it really demonstrates innovation is driving at dell and showing what we have been a unable to unleash in the company the past 15 months. >> the yahoo! ceo marissa mayer is taking heat from activist investors over her plans for all of that alibaba cash. is her job on the line? ♪
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>> on cory johnson and this is "bloomberg west." google is the undisputed search king but some cracks may be showing its armor. their slice of the u.s. search market fell from 79% to 75% last
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year, the biggest drop since 2009. meanwhile yahoo!'s jumped from 7% to 10%. but must not pencils and continued gains just yet. the heat is still clearly on yahoo!. activist investors are ramping up pressure on yahoo!. the firm fired off a letter to marissa mayer, urging her to disclose the plans or the company's lucrative ali baba stake. it also pushes yahoo! to consider an exploration or a combination with aol. with me now is erik schatzker. paul sweeney is also with me. paul, do the pieces of aol's programmatic and search business meld well with yahoo!? >> aol's programmatic platform
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that they have been investing in would meld with anyone that wants to be a player in online video, it particularly mobile video. yahoo! is clearly a player in online video but they have not developed a good mobile business as of yet. they are lagging in mobile by their own admission. the aol-yahoo! merger a lot of investors are skeptical about that. the real viability of that going forward and whether that would create show order value. >> is star board, with just 1% of the shares outstanding in any position to demand anything from yahoo!? >> they are in the position to demand something only as much as star board believes that most of you who's other shareholders -- yahoo!'s other shareholders feel the same way. it is hard to argue with your given they laid out. in the first letter to marissa
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mayer, illustrating numerically how much trapped value there was in yahoo! by virtue of the alibaba and yahoo! japan stakes that were either not being fully valued by the market, or the operating business for example that man and have been fully valued by the market. either way, no matter how you do the numbers, you come up with a higher number than yahoo!'s current market cap of $47 million. if that holds for most of the people had owned yahoo! shares, then star board has some power in that it is driving the dialogue forward and making it impossible for marissa mayer to talk only about things other than unlocking trapped value. >> i talked to marissa mayer and the chief financial officer, ken goldman, both off the record but what i can say, they have gotten a lot of advice on the
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issue. just about every tax attorney that has looked at the issue has offered their opinion. is starboard really putting new ideas on a table, do they think they bring something new to the table? >> i don't think jeff smith of starboard things he needs to put anything new on the table. today's letter have to do with the sign that they perceive, that were semi-or will do something other than a tax efficient spinoff of the alibaba and yahoo! japan assets. however, yahoo! and its lawyers -- however yahoo! and its lawyers choose to structure it it needs to be a spinoff, so the shareholders edited from an unlocked value. what they perceive happening is two things. on the one hand, marissa mayer is contemplating big m&a transactions which scares the living daylights of the people at starboard because they do not feel she is a good acquirer. secondly, they are worried about
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instead of doing a tax efficient spinoff, she will do a split which means she exchanges the value of the alibaba and yahoo! japan stakes for some kind of consideration, whether it is cash or stock, which she could then use her discretion for other purposes presumably acquisitions. like i say, they are scared to death of those because they believed she is kwon during shareholder money. >> although, paul, that might be the most tax efficient choice to swap the assets as opposed to cashing them out. a brilliant investment back in the day. do we get a sense that some of the acquisitions -- in fact marissa has been a crummy acquirer in her tenure. >> you look at yahoo! and the efficacy of their acquisitions. is it contribute into any topline growth? that is the number-one
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operational challenge for this company, and the answer is no. we have not seen any topline growth really since she took over. one could argue the honeymoon is approaching its end between investors and marissa mayer. they want to see a strategy that will result in topline revenue growth. this is a business, the internet advertising business, is growing at least 15% a year but yahoo! is unable to post any topline growth, and that's the challenge. it is wanting to spend a billion dollars on tumblr, and bring on some good talent, but investors need to see the results of that in accelerating topline growth and we have not seen that yet. >> paul sweeney and erik schatzker thank you. great to have you on the show. we have some breaking news right now. the pentagon says it will cut the budget by 20% in the next fiscal year. julie hyman has more from new
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york. >> this is coming from bloomberg news. the pentagon the request is making to congress will be significantly smaller. $51 billion in war funding for the fiscal year starting october 1 is the request it will put forward to congress. that is according to officials and congressional aides. that is a 20% reduction from the $64 billion that congress approved this year. it is also the smallest number since the september 11 terrorist attack. this is called the overseas contingency operation funding. this will be sent to congress in addition to basic defense spending, so this specifically is more for war funding. overall defense spending should be around $534 billion in president obama's budget. this smaller funding could
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reflect the continued withdrawal of u.s. troops from afghanistan. that accounts for part of what we are seeing here. >> the irony, about the same amount that the fcc made taken from that current option. thank you. we will continue to watch the story. up next, he took on amazon with diapers.com before ultimately selling out to them. now he is back and trying to remake the wholesale business. ♪
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>> i am cory johnson, this is "bloomberg west." get ready for a new online wholesale club with someone who has some significant success in e-commerce. the founder of diapers.com sold to amazon in 2010 but he claims his new company is not a competitor. >> any company could decrease prices but the business model that we have put together at yale is -- at scale is suited to bring low prices. it is not amazon, walmart whatever you want to talk about.
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they have already set the prices that make sense to them at scale. this is a different business model. we are able to bring lower prices because we don't make a profit and we have this innovative technology. >> does that mean that your margins are thin, how do you protect those margins? >> similar to costco, bj's, where they make most of their money through membership, you can still build quite a big membership -- big profit from just never ship. >> you have made about $80 million. one of the big fundings out there for a early start up. clearly, logistics will be one area, but how are you deploying some of the money? >> a lot of it is to build up the technology the team, and to advertise the business. we have a pretty substantial advertising budget in 2015 to build awareness for jet. >> how did this idea come up? >> being in the e-commerce
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space, recognizing there was a big opportunity around price. the market is really focused on service. if you look at all the players out there, it is all about ship speed faster delivery convenience. we thought we could innovate around price. >> why didn't cosco or anyone else think about this? >> i am sure there were, but it's a matter of getting the capital and the right team together. we have the right team. build it and go. that is what we've done. >> that was mark lore, ceo of jet.com. it is time for the bwest byte one number that tells us all whole lot. shelby holliday is with us from graceland in memphis, tennessee. what do you have for us? >> the big bite of the day is four dollars, the amount of money elvis presley paid to record his first song back in the 1950's. story has it that he recorded it
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for his mom but he left the record at a friends house. more than half a century later, his friends daughter down the record and she is putting it on auction block for the first time. tonight it is expected to be sold for around $100,000. all of this begs the question how has elvis managed to say --stay so popular well into the afterlife? it is due in large part to technology. he has had some tech savvy managers managing graceland, his music. in honor of his 80th birthday today, they are launching a whole new album on itunes, they have a spotify channel, they are getting towards where you can walk around with an ipad and you can use ibeacon to see some pretty cool images. they are even looking at launching a hologram show in las vegas. so they are keeping elvis alive, literally, with technology. >> not literally because i saw
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him pumping gas today in marin county. >> conspiracy theorists may think that. he is making money. >> he is at the exxon station right now. maybe chevron. it is great that they are doing this and keeping the property alive. or is a great book about the rise of elvis that talks about how new technology of that era allowed him to make these new records, allowed him to get on the radio, helping to become the national thing. >> they say he was on the cutting edge of technology. >> do you like graceland? >> more than half a million people come here every year and they spend money, and guess what, we got sucked in. we spent a lot of money on the souvenirs. >> thank you very much, shelby holliday.
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you can get the latest on your tablet or phone, bloomberg.com bloomberg radio as well. see you tomorrow. ♪
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>> from bloomberg world headquarters in new york, i am mark crumpton. this is "bottom line," the intersection of business and economics with a main street perspective. to our viewers in the united states and those of you joining us from around the world welcome. we have full coverage of the stocks and stories making headlines on this thursday. shelby holliday is live in graceland for birthday celebrations remembering elvis presley. julie hyman is watching the rally in the equity markets come the second and two

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